ACC 250 · Chapter 0 Review Name: ______________________

ACC 250 · Introduction to Financial Accounting

Chapter 0 — Review Questions

Four questions on revenues and expenses,
then one two-year problem worked end to end.

Fall 2026

Revenues · 1 of 2

Q1

A bakery is closing its books for April. Which one is April revenue?

  1. AReceived $2,000 cash for cakes to be delivered in May.✘
  2. BDelivered $3,000 of cakes; the customer pays in May.✔
  3. CBorrowed $5,000 from a bank.✘
  4. DReceived $4,000 from the owner in exchange for stock.✘

B. Revenue follows delivery, not cash. The cakes went out in April, so April earned the $3,000. A, C and D bring in cash without a sale.

Revenues · 2 of 2

Q2

In June a shop delivered $8,000 of goods, received $1,500 in advance for a July order, and collected $900 for goods it had delivered in May. How much is June revenue?

  1. A$8,000✔
  2. B$8,900✘
  3. C$9,500✘
  4. D$10,400✘

A. Only the June delivery is earned in June. The $1,500 has not been delivered yet, and the $900 was earned in May.

Expenses · 1 of 2

Q3

Which one is an expense of this month?

  1. APaid $600 of dividends to the shareholders.✘
  2. BPaid $1,200 of wages for work done this month.✔
  3. CReceived $5,000 of cash from issuing stock.✘
  4. DCollected $900 from a customer for goods delivered last month.✘

B. Wages are a cost of operating the business, used up this month. Dividends are a distribution of profits, not a cost of doing business.

Expenses · 2 of 2

Q4

A company reports revenues of $50,000 and expenses of $32,000, and pays $5,000 of dividends. Which statement is correct?

  1. ANet income is $13,000, because dividends are an expense.✘
  2. BNet income is $18,000, and retained earnings increase by $13,000.✔
  3. CNet income is $18,000, and retained earnings increase by $18,000.✘
  4. DNet income is $18,000, and retained earnings do not change.✘

B. Dividends never enter the income statement: 50,000 − 32,000 = $18,000. They reduce retained earnings one line below it: 18,000 − 5,000 = $13,000.

Q5 · Blue Cart Co.

Q5

Blue Cart Co. opened on January 1 of Year 1, and its first two years are described below. Fill in every blank on the two statements.

Blue Cart Co. — Year 1

  • The owner invested $2,000 in the business in exchange for stock.
  • The company delivered $9,000 of services to customers.
  • It received $1,200 in advance for services it will deliver in Year 2.
  • It used $3,000 of supplies, paid $1,500 of rent, and paid $500 of utilities.
  • It paid $1,000 of dividends to the owner.

Year 2

  • It delivered $14,000 of services, which includes the $1,200 paid in advance.
  • It used $6,000 of supplies, paid $1,800 of rent, and paid $700 of utilities.
  • It paid $2,000 of dividends to the owner.

Income Statement

Year 1Year 2
Revenues$9,000$14,000
Expenses5,0008,500
Net Income$4,000$5,500

Statement of Retained Earnings

Year 1Year 2
Beginning RE$0$3,000
Add: Net Income4,0005,500
Less: Dividends(1,000)(2,000)
Ending RE$3,000$6,500

Watch the two that never appear. The owner's $2,000 of stock is cash without a sale.
The $1,200 received in advance is Year 1 cash but Year 2 revenue — it is earned only when the service is delivered.

Revenues are earned when goods or services are delivered.
Expenses are costs of operating the business used up in the period.
Ending RE = Beginning RE + Net Income − Dividends.

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